Section 2004 Examination and possible objection to discharge

[AbbeyA]

My dh and I filed Ch. 7 BK on Oct. 09. DH had a business fail last year, which had 2 business loans dh personally guaranteed. One of the banks for the business loans filed to go to the 341 meeting but never showed. The trustee declared our case a no asset case, and our house is listed in the bk, which includes a HELOC in addition to the primary mortgage. The last day for any objections, the bank for the business loan filed for a section 2004 examination of finances. They didn't bother to show up for the 341 meeting, but the judge granted it. We submitted all of the information they requested and the last day for them to file an objection to discharge is May 21st. According to our attorney, they actually believe we are hiding assets (absolutely NOT true, we are truly bankrupt after the loss of the business - we personally lost about 500k in the whole thing, not to mention our house - which has liens on it from the business loans and is in foreclosure).

To make a long story short, we have been waiting to hear from them about when we are supposed to be interviewed by the bank's attorneys and STILL have not heard anything. It is now less than 2 weeks away from the final date they have to file an objection. I am looking at this as a positive thing, thinking that they have reviewed our finances to the fullest extent and have come to their senses and will let this nightmare end. BUT, I can't help but get nervous that they are going to file an objection and try to make something up. Wouldn't they need to have concrete evidence of hiding assets to file an objection to discharge? Our attorney has said that he believes they are harassing us "within the bounds of the law," and thinks it's ridiculous that they are going this far with it - he even considered filing sanctions against them for going this far when they blew off the 341 meeting and then extended the whole thing with the further review of our finances after it was declared a no asset case. Any thoughts?

[lrprn]

Given what you've shared here, I would agree with your attorney and follow his recommendations about how to proceed from here.

The worst case scenario - your moron bank spends money pursuing the 2004 and it falls flat on its face because you truly are hiding nothing. They can't produce something out of nothing. As stressful as it is, you'll have to let this run its course. You can't influence it, so turn your worry time into something more productive for you and your family - fine-tuning your family budget, for example.

Hang in there. May 21 will come and then you'll know what your bank is going to do. Until then, don't give them the power to turn your emotions inside out. If your lawyer is right, that's exactly why they are doing this. Don't give them the satisfaction of achieving their goal at your expense. The bk law is on your side in this situation, not theirs.

[AbbeyA]

Ugh, it's been nothing short of a nightmare! There have been so many crazy things that have happened - how the business failed, how the bank acted, we've tried to play by the rules the whole time through it and we've been the ones screwed over. To make it even more ridiculous, the work-out specialist for the bank is MARRIED to the attorney at the law firm that represents the bank!!!! This is the same work-out specialist that dh had to meet with to discuss options and this person pressured and pressured him into reaffirming their debt while suggesting discharging the other business loan in ch.7 bk. Can we say "conflict of interests?"

I keep telling myself there is no way that it won't be discharged, there is nothing hidden, we didn't lie, but things have not played in our favor for such a long time now, it's hard to be positive about anything anymore. It just doesn't make any sense. Do people really try to hide assets and risk having their debts non-dischargeable? BK is serious business, who would think that they could get away with that?

I am ready to move on with our lives and to forget the nightmare that we have been through, it has been a never-ending process that won't really be over until the foreclosure is complete and we are out of this house full of bad memories. As much as we want to be out of here, we need to stay as long as possible so we can set aside whatever money we can before we need to start paying rent. We're estimating a sherrif sale to happen in August at the earliest. Hopefully the market will stay down and by the time we can buy a house again for our family, we will be able to get something better than what we have for less money.

This whole thing just really bothers me --- we did not live above our means, we had an affordable home, tried to live a good life and run a business and we were destroyed by the economy. I feel very victimized by everything that happened. When does this feeling end?

[AbbeyA]

OK, so I just signed up for PACER and checked things out... what surprised me is that the US Trustee signed off of our BK case at the end of January -- his report read that the case is a no asset case, he has examined our financial situation and is extremely thorough and has absolutely deemed it a no asset case, and he stated that the case had already been going on for 4 months. The wording made me feel like he was really pissed that the case was continued. I had a few of the details wrong in my original post -- they first filed a motion for a 60 day time extension, on the last day to file anything, then filed a motion for the 2004 exam. Then they filed a motion to compel for us to turn over tons of information to them - detailed bank statements for the last 5 years and stuff like that, which we gave them. All of their motions have been granted. So now we still wait until the 21st as their last day to file an objection to discharge.

Since the trustee signed off on the case, will pacer be accurate and up to speed? I would like to check it again on the 21st at the end of the day to make sure nothing was filed. Any additional thoughts on this? As far as I know, they still have not made any contact for us to be interviewed as ordered in the 2004 exam.

Also, what do you think is an appropriate time for our lawyer to get back to us? I emailed him one week ago today and nothing. I emailed him again this afternoon with the same questions I had last week and nothing so far. I think this is totally unacceptable, but do I say anything since we are so close to having this thing over? (assuming they don't file any objections). Thanks for any insight and I hopefully will be doing a happy dance at the end of the day on the 21st. Is this like a "business hour" kind of thing - like if they don't file by 5pm they are SOL? Just wondering what time to check pacer to know for sure.

[catleg]

You are being harassed within the law, as you stated. Just sit tight and think happy thoughts and it'll all be over soon. For all you know the FDIC could march in and close the bank on any given Friday (it's not one of the "too big to fail" banks is it? Sounds like local yokel community bankers).

[Brazzy]

Its not like the bank represents itself. They will hire attorneys. Of course objecting to the the discharge of a debt is very difficult. Most of the time a 2004 is conducted to see if they catch you with a smoking gun. Personally I find them to be a waste of time and money. Great the attorneys get to ask a couple of questions. If your case is based entirely on that its a waste. Mind as well object to the discharge and ask those questions while deposing the debtor while going through a discovery. The truth is that if you dig deep enough (both into the debtors personal business as well as case law) you will find something. Its usually not much but enough to push it to a trial. If it gets that far you can drop some coin on defending yourself OR settle for less than it would cost to defend yourself. If what you say is true that seems to be your worst case scenario.

[AbbeyA]

You are being harassed within the law, as you stated. Just sit tight and think happy thoughts and it'll all be over soon. For all you know the FDIC could march in and close the bank on any given Friday (it's not one of the "too big to fail" banks is it? Sounds like local yokel community bankers).

A couple of weeks ago, the 10:00 news had a tag line report about a local bank being shut down by the FDIC. We looked at each other like - OMG! What if it is "THE" Bank?? Unfortunately it wasn't that one, so now we wait ... ... Yes, it is considered a local bank, but there are several branches so I don't think it is considered to be a small banking institution.

Thanks for your thoughts, sometimes I think I am being oversensitive to the whole thing - but then I absolutely know they are harassing us and convince myself that my feelings are just and warranted. OK, bring on May 21st. I'm ready!

[AbbeyA]

Its not like the bank represents itself. They will hire attorneys. Of course objecting to the the discharge of a debt is very difficult. Most of the time a 2004 is conducted to see if they catch you with a smoking gun. Personally I find them to be a waste of time and money. Great the attorneys get to ask a couple of questions. If your case is based entirely on that its a waste. Mind as well object to the discharge and ask those questions while deposing the debtor while going through a discovery. The truth is that if you dig deep enough (both into the debtors personal business as well as case law) you will find something. Its usually not much but enough to push it to a trial. If it gets that far you can drop some coin on defending yourself OR settle for less than it would cost to defend yourself. If what you say is true that seems to be your worst case scenario.

This was a business debt - and a significant amount of money. We will not settle with them, we did nothing wrong. We are like the thousands of other small business owners who have lost businesses in this economy.

[catleg]

It also occurs to me that if there is a cozy relationship between the bank employee and the attorney, that they could just be "looting" the bank by running up unnecessary legal expenses. Maybe if you feel like having some fun at their expense you could drop a dime on them to the bank president. But wait until your case gets past the deadline. :-)

By itself it may not mean much, but there could be a pattern of activity by the husband/wife team that is suspicious.

[AbbeyA]

So I just heard from our attorney -- we are supposed to go meet with the bank's attorneys on Monday morning for this portion of the 2004 exam. Are they just going through the motions of all of this? Our attorney said that he is not worried, they are doing what the bank has asked them to do ... blah blah blah ... Worried.

Again, I keep telling myself that there are no assets hidden, there is nothing to find so we will be OK in the end. But I am still scared of all of this. I hate this bank. Has anyone been through this 2004 exam before? I am anticipating it like the 341 meeting, but only more nerve wracking.

[DeadManCrawling]

They are probably hoping you will suggest negotiating, in hopes of a settlement, before Monday.

If you are in the right, so to speak, and your attorney is confident, I wouldn't worry. Many times, the exam reveals nothing of interest, and the opposing party, left with nothing to pursue, drops the case.

[AbbeyA]

They are probably hoping you will suggest negotiating, in hopes of a settlement, before Monday.

If you are in the right, so to speak, and your attorney is confident, I wouldn't worry. Many times, the exam reveals nothing of interest, and the opposing party, left with nothing to pursue, drops the case.

So you think they are just continuing to bully us into settling the debt? At what point does it need to go to where we can file sanctions against them? They can't file an objection without warrant, right? If they did file an objection without warrant, do we then file sanctions against them? I would like to file harassment charges against them if we can.

This bank has gone above and beyond corruption in my opinion. When it all started, they threatened dh with collapsing on the business loan b/c a collateral stock account was down due to the economy/market. There were significant cash flow problems at that time due to people not paying bills and such. The banker knew of all of this and we knew things were on shaky ground, dh was in the process of having a workout specialist scale things down to bare essentials and ride out the economy and pull through on the other side. (In hindsight, I don't think this would have been successful in the long run, but that was the plan at the time.) Shortly thereafter, the banker called dh and said they needed more money to have the loan better collateralized. DH foolishly trusted the banker in that he wouldn't collapse on the loan once he got the money --- fast forward about a month or less and there was one other big thing that happened within the business and the banker called it quits. The additional money put in was gone, everything was over, and the entire company was no longer worth anything b/c of how it ended so abruptly on the bank's call. Dh begged and pleaded to taper things off, hoping to sell off the "intellectual property" without the company being out of business, just on a skeleton crew but still operating -- so there would be more money recouped from the sale of the "assets." No go from the banker, it was over, and they never got anything from the "assets" aside from the outstanding accounts receivables. Furthermore, the bank made a preferential payment to one of the businesses creditors out of the business account for about $40k. The creditor is the business accountant, who was the accountant suggested by the bank when the loan was taken out. The whole thing smells like a dead rat.

Does anyone have any suggestions/comments on if we could go after this bank when it is all over. Obviously we don't have the money at this time to do anything like this, but just wondering -- I know there are some lawyers on here -- your thoughts?

[AngelinaCatHub]

As one having to go through a 2004, it is easy and relatively painless. We did not have our lawyer with us (of course we had no idea what we were doing anyway) but we met with the Trustees lawyer. Ours was to determine a preferential payment and where the money came from. Of course like you folks we were terrified and stammered and stuttered as well. He taped the talk, I don't remember being sworn in, there were only us three. He asked where this and that came from. and thanked us. Later on, a paper hit PACER asking to recover our two payments that were preferential. I actually called the lawyer and followed up with a letter asking if we could pay this amount instead of recovery it from the kids. He gave permission, we did the thing and all went well.

NO ONE has messed up their case as badly as we did, but our ignorance was so becomingly apparent that anyone could see we did nothing in malice or fraud.

The 2004 is used only as if it were a deposition. You are asked to provide the answers to their questions. The only right answers are "Yes, No, I don't remember". Volunteer no explanations. Say only what is asked of you.

Now if they get an exception to this creditor on your bk, you can fight this situation. It will not stop your bk from all the rest of the credit being discharged nor will an AP stop the bk. Our AP was open a year longer than our bk.

You cannot make a sanction against your adversary. Sanctions are made by a Judge. As all have said here on your thread, wait and see. They seemingly have a weak case. If they cannot come up with more than the facts, I would say the 2004 action will be denied by the Judge. You now have less that two weeks and things will get better. 'Hub

[catleg]

The best revenge is just to get on with your life. Don't waste your energy and emotions on bankers and creditors lawyers. Cause, the trouble is, any tort you'd recover would just be a pre-petition asset to be distributed to ... creditors . :-(

Practice your answers, bring your lawyer, and get it over with.

I agree it sounds like you got taken advantage of, doesn't everyone who goes into debt with a banker? :-)

[AbbeyA]

So the 2004 examination meeting was today. They asked lots of questions about the business financials -- asking specific questions about checks to vendors, what they were for, how dh paid himself etc... Basically it was a fishing expedition to see if he took unauthorized money out of the business, which did not happen. They asked minimal questions about our personal finances as everything is clearly accounted for and there are no hidden assets. There is nothing improper about this. What I found funny is that the attorney looked stupid b/c she kept asking about checks dh would pay to the company from our personal account -- it was always for payroll when cash flow started to become a problem and she asked if he ever paid himself back ... ummm, NO! It is quite apparent that he did his best to keep the company going by putting in more personal money when is was at the end.

Our attorney thinks they are absolutely fishing and haven't found anything (there is nothing to find), but thinks they are trying to trip him up and get a technicality to stick him with the debt. He does believe they are going to file an objection to discharge -- not sure what they are going to base it on though. There was no bombshell evidence, there was nothing dh couldn't account for accurately and efficiently.

Attorney will file an objection to their objection, asking them to produce their evidence, which they don't have.

Sigh ... almost 8 months in and I don't think it is going to be over yet.

When does the lawyer's oath that they are sworn in by come into play? When does an attorney look at things and accept the true situation and let something like this go? When do they advise their client that there is nothing more to pursue? When do they look at the human aspect of this and and the whole big picture and stop trying to screw us to the wall? If they file an objection without merit, will the judge reprimand them and possibly file sanctions?

They have until Friday to file an objection. I hope our attorney is wrong about this. He still is not concerned about it not being discharged, just really pissed that they are doing this and it will probably go to the next step.

I can't take much more of this, it has been going on so long now.
I called my doctor today to start an antidepressant - I have nothing left in me to cope anymore with the foreclosure and moving stuff still in process and this stuff still not being over.